December 06, 2016

However, Dismissal Did Trigger Routine Costs Recovery To Be Considered On Remand.

In Buck v. Brooks, Case No. A142929 (1st Dist., Div. 3 Dec. 5, 2016) (unpublished), plaintiff limited partner sued to obtain more accountability from defendant general partner as far as the running of a limited partnership owning a San Leandro shopping center. Post-lawsuit, plaintiff did obtain some of her litigation objectives by having defendant restore profit distributions, deposit partnership funds into interest-bearing accounts, and allow her inspection of partnership documents, even though demurrers were being filed by general partner along the way. Plaintiff limited partner eventually voluntarily dismissed her action without prejudice, prompting defendant to file a costs memorandum and attorney’s fees motion.

The lower court granted plaintiff’s motion to tax costs and denied the defense fee motion, with defendant appealing both determinations.

“Split verdict” on appeal, but more on plaintiff’s side.

The fee motion was correctly denied based on Santisas [a case on our “Leading Cases” list]. Even though the limited partnership fees clause was broad, it did not define “prevailing party” such that general principles applied. Beyond that, the record showed that plaintiff did obtain several of her litigation objectives, justifying the lower court to conclude the action was not meritless and that she gained enough to prevent defendant from being the “prevailing party.”

However, a different matter was presented as far as the routine costs denial. Defendant was a prevailing party, for costs, based on plaintiff’s dismissal so as to result in a remand. But the appellate court did observe that the partnership document photocopy expense needed to be looked at anew to make sure it was necessary and convenient for the litigation in the “re-do” examination.

Basically, a SLAPP winner decided to request $152,529.95 in mandatory fees, subject only to the fees being “reasonable”—which was the rub in this matter. This was based on a $750 hourly rate for a senior attorney not experienced on SLAPP matters and on a $350 hourly rate for a fifth year associate. The lower court found that $275 per hour was more like it for a San Diego-venued case, especially where a seasoned attorney for another party in the case had charged this very same rate. The trial judge also determined the work was excessive, awarding only $30,752.86 in fees and prompting an appeal by the losing party.

The appellate court affirmed. Because this was governed under a deferential abuse of discretion review standard, the lower court had to resolve conflicting testimony about hourly rates and had discretion to pick the appropriate one, not having to accept hourly rates listed in the Laffey Matrix. (Syers Properties III, Inc. v. Rankin, 226 Cal.App.4th 691, 702 (2014).) The reviewing court also endorsed these common sense principles in the fee petition area: (1) lower rates should be utilized by seasoned attorneys doing tasks normally delegated to younger attorneys; and (2) blended hourly rates are acceptable in the right context. The trial judge did not err in concluding that the fee request was inflated, reducing for that factor also.

Lund v. Gifford, Case No. B259366 (2d Dist., Div. 3 Dec. 2, 2016) (unpublished) is a good example of how a successful defendant’s attorneys should draft a fee petition after winning a SLAPP motion on behalf of their client.

Defendant moved to recoup $73,780 in fees, supported by declarations from the partner and associate working the case. The partner submitted a declaration indicating he was a 20-year practicing attorney and his $590 hourly rate was reasonable for comparable Orange County large firms. The associate (a five year practicing attorney) submitted a declaration indicating her hourly rate was $490 in 2013 and $500 in 2014, and that she excluded work unrelated to the SLAPP motion from the fee claim. In response, plaintiff submitted a declaration from a fee expert who opined that $299-375 should be the appropriate hourly rate and that the work was excessive, suggesting the fee award should be in the $22,634.30 - $28,387.50 range.

The trial court awarded $66,627, finding the requested hourly rates were reasonable based on the judge’s own perception that fifth year associates in L.A. firms bill between $390-$600 per hour. The judge found the work to be reasonable in magnitude, but reduced the request for certain discovery work which could have been allowed (but was not).

Defendant’s appeal of the fee award was unsuccessful, in addition to not obtaining a reversal of the underlying SLAPP grant. The appellate court found that the declarations were detailed, augmented by also including verified time statements—no problem in substantiation, with the defense not having to introduce salary surveys to meet a fee petition burden of proof. The appellate court could not say the case was overstaffed with one partner and one associate, especially given that the SLAPP motion was somewhat complex in nature. On the hourly rates, the lower court was within its right to make its own determination of what was reasonable based on knowledge of the relevant legal market. Finally, although there was some block billing, it was not so vague as to prevent meaningful review of the performed work.

However, Work Not Incurred In Particular Special Surety Action Was Not Compensable.

Code of Civil Procedure section 386.6 gives courts discretion to award costs and attorney’s fees to a party who pursues the deposit and discharge procedure provided by section 386.5 in a post-judgment surety bond case, namely, allowing a neutral stakeholder to apply for a discharge and obtain a dismissal if the surety is truly a neutral stakeholder (a “deposit/discharge motion”).

These sections were in play in Wertheim, LLC v. The Bar Pan Mutual Ins. Co., Case No B268539 (2d Dist., Div. 5 Dec. 1, 2016) (unpublished), which involved a dispute between parties about the amount of fees to be paid by a surety on an appeals bond after an earlier appellate proceeding.

The appellate issues involved a determination of the attorney work which can be compensated under section 386.6, given three constructs are at issue: (1) fees can only encompass fees “incurred in such action”—the independent judgment creditor action by which surety files the deposit/discharge motion; (2) fees must be reasonable; and (3) fees are only allowed for reimbursement of fees incurred in connection with independent judgment creditor v. surety action and with the deposit/discharge motion in that action.

By and large, the reviewing court affirmed a fee motion for the prevailing surety except for one item. All pre-motion, motion, and post-motion deposit/discharge work was found compensable in the actual action between the earlier judgment creditor and surety, the post-judgment action by judgment creditor against the appeal bond surety. However, the surety also sought compensation for attorney work in the earlier, underlying action before the independent surety action was commenced. This did not fly because section 386.6 only allows recovery for work in the actual inter se judgment creditor/surety action—so about $10,000 got lopped off of the recovery and both parties were ordered to bear their own costs on appeal.

November 30, 2016

Any Other Result Would Retard Individuals Going Into “Corporate Service.”

The Delaware Supreme Court, in Trascent Mgt. Consulting, LLC v. Bouri, Case No. 126, 2016 (Del. Supreme Ct. Nov. 28, 2016), was confronted with an LLC’s claim that it did not have to advance costs of defense to a “key man” employee in a contractual breach suit brought by the LLC based on LLC’s plenary claim that key man had fraudulently induced his employment through upfront misrepresentations. The high court rejected this argument because corporate advancement of defense costs is to be encouraged under Delaware law until a court makes a final, nonappealable determination that indemnification of the key man was not required. It found that entertainment of the plenary “fraud in the inducement” defense would subvert the advancement procedures and reduce the ability to attract capable individuals into corporate service.

City of Selma v. City of Kingsburg, Case No. F072632 (5th Dist. Nov. 29, 2016) (unpublished) cast two Central Valley municipalities against each other in a situation where we would guess cities are fiscally making moves to get whatever moneys they can.

Kingsburg, which dubs itself as “Little Sweden,” filed costs memoranda in two CEQA cases for the costs of preparing the record in those matters against City of Selma. Selma’s motion to tax/strike costs was denied, prompting an appeal.

Selma did not gain any further traction on appeal. Kingsburg’s costs memos were timely filed, because the minute order directed preparation of a more formal judgment having the effect of extending the time to file costs memoranda. Selma did not satisfy its burden to justify taxing/striking costs at the trial level, because it failed to indicate how many pages were improperly included by Kingsburg in the CEQA prepared record for purposes of proving its challenge on this basis. Affirmed.

However, Apportionment Was Required On Remand—Consideration Of Many Factors.

In Bank of Southern California, N.A. v. D&D Goryoka, Inc., Case No. D069767 (4th Dist., Div. 1 Nov. 29, 2016) (unpublished), defendant/cross-complainant was denied a prevailing party fee request as against plaintiff/cross-defendant Bank to the tune of a $908,171.25 request (later reduced to $795,753). Defendant “defensed” Bank’s complaint, although Bank did win a judgment against some co-defendants represented by the same counsel who represented prevailing defendant. The lower court denied prevailing defendant’s fee request under the “unity of interest” principle. The appellate court reversed and remanded for an apportionment of work, if possible, between successful versus unsuccessful defendants.

The 4/1 DCA agreed that the “unity of interest” principle was no longer valid based on legislative amendments, as confirmed by the 4/3 DCA’s analysis in Charton v. Harkey, 247 Cal.App.4th 730, 741-742 (2016) [discussed in our May 24, 2016 post]. The fee requesting defendant did prevail pursuant to contractual fee clauses, and it was an abuse of discretion for the trial court to not apportion fees between the work for successful versus unsuccessful defendants. However, the appellate court made it clear it was not shackling the trial judge in making apportionment decisions, including the fact that the successful defendant had dissolved and was in the process of winding up such that it was not an active entity for entity purposes. Finally, the reviewing court determined that the fee award belonged to the client, not the attorney—refusing to extend FEHA principles to the civil context of the fee award in this instance.

In Davis v. The J. Hartman Co., Case No. G051648 (4th Dist., Div. 3 Nov. 28, 2016) (unpublished), a fees clause in a real estate independent contractor consulting agreement provided that a judge or arbitrator in an arbitration had to award reasonable attorney’s fees to the prevailing party. However, the matter was not arbitrated, but was heard by a court-appointed referee. After the referee adjudicated the matter, one party moved to recoup fees. Both the trial and appellate courts said “no go,” rejecting the fee request.

The fees clause was clear—it only applied to an arbitration, and that did not happen. The appellate court also rejected the argument that a prayer for fees in a pleading is the equivalent of a judicial admission, because such a prayer does not establish whether there was substantive fee entitlement (which was missing in this one).

Would Allow For Fraudulent Billing, But Appellate Court Did Not Say A Longer Period For Review Might Pass Muster.

We have seen numerous attorney-client retainer agreements where there is a clause that says if a client does not dispute a billing entry within 10 or 15 days of receipt, all of the entries are acknowledged as being correct or accurate as between attorney and client. Lawyers likely assume that these clauses are enforceable, but the 4/3 DCA in a 3-0 opinion by Justice Fybel, relying on precedent, recently disabused that notion.

In Cannon & Nelms, APC v. St. Andrews Development Corp., Case No. G052813 (4th Dist., Div. 3 Nov. 23, 2016) (unpublished), a law firm used a 15-day “review or be damned” clause to obtain summary adjudication on a contract count against a client, obtaining a judgment of $394,155.87 in damages and $57,003.31 in prejudgment interest.

All of that went away on appeal because the fees clause was found to be unenforceable based on the reasoning of Charnay v. Cobert, 145 Cal.App.4th 170, 182-183, which found that this would allow a lawyer to fraudulently bill and then be improperly immunized from liability based on the wording of the clause.

However, the 4/3 DCA panel did hinge its result on the fact a 15-day period was too short to comport with fiduciary standards between attorney and client. “We do not address whether a much lengthier period of time in which to dispute attorney invoices might be enforceable.” (Slip Op. at 9-10.) Also, the appellate court strongly suggested that an expert witness might be advisable on remand to assist the court in determining the amount of attorney fees. (See Donahue v. Donahue, 182 Cal.App.4th 259, 276.)

NOTE: Retainer agreements are also the subject of yesterday’s post about the MCLE article, “Ensure that your clients pay your fees” – an article also discussing a dispute waiver provision and Charnay v. Colbert.

November 29, 2016

Under the heading “Ensure That Your Clients Pay Your Fees”, attorney Lorraine M. Walsh of Walnut Creek has written an ethics/professional responsibility article that appears in the November 4, 2016 on-line edition of the Los Angeles Daily Journal. Ms. Walsh covers basic rules for fee contracts in California, rules for bills, common improper billing practices to avoid, and unenforceability of a dispute waiver provision. Plus, California State Bar members can then click to an MCLE test that they can take for MCLE credit.

Partition disputes are equitable, with a broad fee-shifting statute in the form of Code of Civil Procedure section 874.040 allowing a trial court broad discretion to equitably apportion fees and costs among the parties to the partition action.

In Cummings v. Cummings, Case Nos. H040710 and H041308 (6th Dist. Nov. 23, 2016) (unpublished) (separate decisions), four siblings were involved in a family trust partition action involving a Los Altos Hills property. One brother out of the four siblings opposed a partition for sale of the property and apparently was not amenable to seek viable options to avoid conflict. Eventually, brother lost in the partition actions, prompting the other siblings to seek recoupment of fees and costs after the trial court ordered a partition by sale.

Case No. H040710 involved the trial judge’s award of $115,000 in fees and costs to the prevailing siblings, almost the entire request with some minor cost disallowances. The Sixth District affirmed, determining that brother was unsuccessful in opposing the partition by sale and refused to arrive at a solution short of an acrimonious conflict. (Lin v. Jeng, 203 Cal.App.4th 1008, 1023-1025 (2012) [discussed in our Feb. 24, 2012 post; court’s discretion to apportion in partition actions is equitable, not constrained or tied to the number of parties necessarily involved in such a dispute].)

Brother did not fare any better in Case No. H041308, where his sisters obtained a further fee award of $51,323.56 for other work after the partition by sale order occurred.

The Third District in Clapp v. Terry, Case No. C076562 (3d Dist. Nov. 23, 2016) (unpublished) is an important primer on the proper methodology to be used when awarding lodestar fees, fees on fees, and costs in civil right cases to prevailing plaintiffs under 42 U.S.C. § 1983.

There, plaintiff won $12,533.43 compensatory and $500 punitive damages in total against two defendants in an excessive force case, although losing related claims and obtaining no verdict against the County, its sheriff, or a deputy. Plaintiff then made two applications for fees and costs pursuant to 42 U.S.C. § 1983.

On the first one where $440,473 in fees was sought, the trial judge made some lodestar reductions for efficiency and deduction of hours spent against defendants for which no recovery was had, and then made a .4 further reduction for limited success in the case, bringing the fee award down to $167,116.32. The lower court also failed to award some costs which were included in the fee request. Plaintiff appealed those determinations.

The second application, for “fees on fees,” sought $72,506.50 in fees and $2,126.70 in costs. The lower court awarded them all, determining that the limited success consideration only went to the merits and should not be factored into the “fees on fees” calculation. This prompted an appeal by the two losing defendants.

The Third District sorted through the lower court’s methodology, reversing and remanding the various determinations. The main infirmity with the fee award on the first application was the lower court’s utilization of an impermissible “double deduction” by initially reducing for unsuccessful hours and then again doing a further .4 reduction for the same limited success factor. The trial judge also failed to award costs/expenses included in the fee requests, which are compensable as fees under § 1983 (with California’s normal routine costs analysis being irrelevant). The flaw in the “fees on fees” calculation was the lower court’s failure to consider degree of success in awarding the fees sought under the second application. Remanded for a “re-do.”

Marriage of Hettinga & Loumena, Case No. H041589 (6th Dist. Nov. 22, 2016) (unpublished) shows the dangers of undertaking an appeal without knowing the nuances of appellate practice. In this one, wife—who previously had been sanctioned $100,000 and declared a vexatious litigant—got sanctioned against for $210,000 under Family Code section 271. Although she appealed, the award was affirmed because an inadequate record was presented before the reviewing court: incomplete sanction motion paperwork was presented and no record citations to hearing transcripts were included. Ouch!______________________________

1 “A little learning is a dangerous thing; Drink deep, or taste not the Pierian spring.” -- Alexander Pope, Part II of An Essay on Criticism. Often misquoted as, “a little knowledge is a dangerous thing.”

Appellate Court Also Chastised Parties For Lack Of Record Citation In Appeals Briefing.

In Sardab v. Acme Bail Bonds Co., Case No. G050554 (4th Dist., Div. 3 Nov. 22, 2016) (unpublished), plaintiff was determined to be the prevailing party in a quiet title action after a judge’s ruling that she could void a husband’s property encumbrance as to her original 50% interest. Although some other claims were dismissed, both the trial and appellate courts sustained the view that plaintiff prevailed given that she prevailed on her main litigation objective and there was no sufficient record of what happened at trial to determine if the lower court erred in making its prevailing party determination. With respect to fees, however, plaintiff was neither a party nor a third party beneficiary of any contract so as to gain fee entitlement.

However, at the beginning of the opinion, Justice Thompson, for a 3-0 panel, reminded both sides that they had violated California Rules of Court by not providing adequate record citations in both their factual summaries and argumentative portions of appellate briefing. (See Cal. Rules of Court, rule 8.204(a)(1)(C).)

As far as challenges to fee awards, we would have to say that challenges to awards under the “tort of another” doctrine have higher chances of reversal, based on the restrictions applicable to use of this doctrine. Los Angeles Community College Dist. v. Roosevelt Lofts, LLC, Case No. B266057 (2d Dist., Div. 4 Nov. 22, 2016) (unpublished) is a nice illustration of this general observation.

There, appellant Roosevelt Lofts was found to have engaged in fraud in acquiring an easement from the District. Subsequently, the trial judge awarded $294,271 in attorney’s fees to District and against Roosevelt Lofts under the “tort of another” doctrine for work associated with a bankruptcy proceeding, the underlying action (especially an appeal), and a quiet title against another party basically affiliated with Roosevelt Lofts.

The 2/4 DCA reversed the fee award as a matter of law.

The “tort of another” doctrine is subject to these important restrictions: (1) no recovery is permitted for fees incurred in litigation directed against the tortfeasor, even though other parties are incidentally involved; (2) no recovery is permitted for fees incurred in litigation involving a third party sharing the same interests as the tortfeasor; and (3) fees incurred in third party litigation may be recovered from a defendant only when that litigation is “the natural and probable consequence” of the defendant’s tortious conduct such as the third party’s independent conduct (a proximate causation requirement). Application of these restrictions required reversal of the entire fee award, because (1) the pre-decision portion of the bankruptcy proceeding did not constitute an action against the affiliated third party but only insolvency battling with Roosevelt Lofts; (2) the first appeal work did not qualify because the affiliated third party was representing Roosevelt Loft’s interest in that appeal; and (3) post-appeal work pertained to the affiliated third party’s independent conduct for which Roosevelt Lofts could not bear “tort of another” fee exposure.

In Gee v. Greyhound Lines, Inc., Case No. C077077 (3d Dist. Nov. 21, 2016) (published), plaintiff had her case dismissed after she failed to pay venue transfer fees based on her attorney’s error. The trial court granted relief to plaintiff under section 473. The Third District affirmed. “Section 473, subdivision (b), can provide relief when an action is dismissed due to a plaintiff’s counsel’s mistake or inexcusable neglect related to the failure to pay change of venue fees.”

BLOG HAT TIP—The winning attorney was Stuart R. Chandler, aka “Mr. Fresno”. Co-contributor Mike knows Mr. Chandler well, he graduated from the same high school class (Bullard High, Fresno) and he/Mike studied for the bar together in Fresno during the summer of 1979. Congratulations, Stuart!

In Young, teacher was cleared of sexual misconduct charges, but found to have engaged in “unprofessional conduct,” in an administrative proceeding resulting in her reinstatement. She then sued school district under FEHA, but lost on summary judgment. School district then took the offensive and moved to recover fees, with the lower court granting $16,175.50 in fees and costs.

The fees/costs award was reversed on appeal. A higher standard did govern the fee/costs determination under FEHA against a non-prevailing plaintiff, with the record showing she did have sufficient proof of animus (with respect to pretextual conduct, often proven through circumstantial evidence) to prosecute her suit. Reversed.

November 17, 2016

Prevailing Party Determination Was A Discretionary One For Lower Court.

In Enayat v. Missaghi, Case No. B260861 (2d Dist., Div. 5 Nov. 17, 2016) (unpublished), defendants won a “waste” lease dispute against a plaintiff alleging two tort claims, and one of the defendants also won on a slander cross-claim (resulting in $1 nominal damages), but lost on three other cross-claims. Both the original lease and a settlement agreement had fees clause, so defendants moved for recovery of fees under Civil Code section 1717. The lower court determined they were prevailing parties and awarded them $152,791.50.

The fee award was affirmed on appeal. Although plaintiff argued that the lease was superseded by the settlement agreement on a novation theory, this contention did not resonate because both documents had fees clauses. Plaintiff then argued he was the prevailing party after winning three of four cross-claims, but the appellate court found the lower court did not abuse its discretion in determining defendants prevailed for fee purposes. Defendants did prevail on plaintiff’s complaint, and neither party (plaintiff and the one defendant/cross-complainant) achieved complete victory under the cross-complaint such that the lower court had discretion to determine who prevailed; its decision was no clear abuse of discretion.

November 14, 2016

In Saldana v. Noh, Case No. A143491 (1st Dist., Div. 2 Nov. 14, 2016) (unpublished), wife moved to recover fees against husband under Family Code section 6344, which allows a prevailing party in a Domestic Violence Prevention Act (DVPA) proceeding to recoup fees. However, the lower court awarded $72,660 to wife instead under Family Code sections 2030/2032 “needs based” statutes. The fee award against husband was reversed on appeal.

Under the circumstances, the fee award was an abuse of discretion. Although financial resources have to be considered under both statutes, the DVPA statute requires a prevailing party determination and an award of fees in a DVPA proceeding—different elements than those considered in 2030/2032 needs-based awards. These differences required a reversal and remand to gauge the situation under DVPA.